PETER THIEL: How does someone become a
billionaire? Well, the most popular option is to start a company, maintain as much equity as you
can, and scale the business to the moon. This is precisely what all of the most famous billionaires
did including Jeff Bezos, Mark Zuckerberg, Elon Musk, Steve Jobs, Bill Gates, and so on. In fact,
a lot of them only own single-digit percentages of their company at this point, but it still
translates to a massive fortune. Jensen Huang for example only owns a little more than 3% of Nvidia,
but that itself translates to over $70 billion. A less common way is to invest yourself up there.
Legendary investors like Warren Buffett and Jim Simons were able to compound a modest
amount of money in tens of billions over a lifetime of investing. More recently,
we’ve also seen some employee billionaires pop up here and there like Tim Cook, Sundar Pichai,
and Steve Ballmer. No matter how these guys made their fortunes though, one common thread is that
they all worked extremely hard. Most of these people worked to live for decades and still
work to live even though they’re already rich. But what if I told you that there was someone
who not only made $1 billion but $10 billion and never really any real earned income? Well,
that’s exactly what Peter Thiel did. You see, Peter never really had a job at his
own company or any 3rd party company. And no he didn’t inherit his money either. What
Peter actually did was align himself with people who did have money and people who did
have businesses and he connected the two and made billions in the process. He was basically a
trillion-dollar real estate estate agent. And that’s by no means a knock on Peter. In fact,
it’s the exact opposite. Peter basically worked smarter, not harder. While Peter was never really
working to the bone, he did take on insane amounts of risk, stress, and responsibility,
and he made it such that billions of dollars were working for him so that he never had to. So,
here’s the insane story of Peter Thiel, the man who made $10 billion without ever working.
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newsletter. But anyway, taking a look back, the story of Peter Thiel takes us back to October 11,
1967, to Frankfurt, West Germany. This was during the peak of the Cold War and the race to the moon,
so tensions between West Germany and East Germany were at an all-time high. In an effort to create a
better environment for his family, Klaus Friedrich Theil, Peter’s father would moved the family to
Cleveland, Ohio when Peter was just 1 year old, but this was by no means a permanent arrangement.
Peter’s father worked as a chemical engineer for various mining companies, so the family
was regularly on the move. At one point, the family even lived in modern-day Namibia. In fact,
Peter switched elementary schools 7 times meaning that he didn’t even average 1 full year at any
school. By the time that Peter reached middle school though, the family finally settled down
in Foster City, California, giving Peter the space to excel, and let’s just say, Peter more
than excelled. He was a natural mathematician. In fact, he would place first in a state-wide math
competition in California. He would also graduate valedictorian. Hearing this, I don’t think you’d
be surprised to hear that Peter would be accepted into Stanford, but you might be surprised at what
he chose to major in. He didn’t major in computer science or engineering or anything STEM-related.
He actually chose to major in philosophy. And this was during the era in which identity politics
and political correctness were first starting to make their rounds which stirred up quite a bit of
controversy on campus. Peter was very much against these new ideologies, so much so that he created
his own libertarian campus newspaper for Stanford called the Stanford Review. Peter would go on to
serve as the newspaper’s editor-in-chief for the rest of his undergraduate studies. Seeing this,
you might think that Peter went on to pursue journalism but that’s not quite how things
played out. After graduating in 1989, Peter would turn around and enroll in Stanford’s Law School
and earn his law degree in 1992. With that big of a commitment, you would think that Peter would
pursue a career as a lawyer but that couldn’t be further from the truth. Peter barely lasted
a year in the world of law. His first job was as a clerk for a judge on the US Court of Appeals in
Alabama. He wasn’t a big fan of clerking though. He thought that some finance might make things a
bit more interesting, so he quickly switched over to being a securities lawyer for a financial firm
in New York but he only lasted here for 7 months and 3 days. And by 1993, he was completely done
with the law citing a lack of transcendental value in the job. So, at age 26, Peter would decide to
make a complete pivot to the finance industry. He would straight up take on a job as a currency
derivatives trader at Credit Suisse. But while there was a lot of money to be made in this field,
this too did not fulfill Peter’s need for purpose and meaning. So, he once again left this job and
took on a role that was well below his pay grade. He became a speech writer for then US
Secretary of Education William Bennett, but this too was not what he was looking for. Eventually,
in 1996, Peter returned to California completely lost. He had all the intelligence and education
in the world, yet somehow, he didn’t have a career. This is when Peter first realized
that maybe the traditional 9 to 5 just wasn’t for him leading us to Peter’s insane pivot.
THIEL CAPITAL MANAGEMENT: While law school didn’t give Peter a career
that he actually wanted, it did set him up with an insane amount of connections. Just think about
it. He knew dozens of lawyers from Stanford Law School and dozens of finance bros from his time
in New York. In other words, he was surrounded by multi-millionaires and even deca millionaires,
and that gave him an idea. What if he opened up an investment firm, and not just a value investing
firm like Warren Buffett or a trading firm like Jim Simons, but the riskiest of all investing
firms: a seed venture capital firm. If you’re not familiar with seed venture capital, it’s basically
when a bunch of college kids and young adults come to you with a PowerPoint and ask you to give them
hundreds of thousands if not millions of dollars to grow their business. Naturally, a majority of
these startups will fail, but the idea is that a few of them will end up becoming the next
Microsoft or Apple and make all the losses worth it. Usually, seed and angel investing is a game of
billionaires. Once founders make a crap ton of money, they like to get into VC investing, not
necessarily to make money but basically to pay it forward for the next generation of entrepreneurs.
A perfect example of this is Shark Tank. All of the sharks are multi-centi millionaires or
straight-up billionaires and they’re for the most part retired. Investing in all these startups is
just something they do for fun, and if it turns out to be profitable, even better. Peter, however,
wasn’t doing this for fun, he was doing it for profit. Also, Peter didn’t have any money to burn
either, so he would end up asking all his wealthy friends for money. The pitch was basically,
give me some money so that I can invest it in the riskiest places in the world,
and by the way, there’s a 90% chance that you lose everything. The only reason this pitch worked was
because his friends had money to burn. Really goes to show the importance of building up a
strong and powerful network. But anyway, Peter managed to raise $1 million from his network,
and with that, he would establish Thiel Capital Management in 1996. Now, you might be wondering,
how does Peter make money from all of this? Well, it’s not clear what structure Peter used exactly,
but the traditional approach is 2 and 20. Basically, the fund manager,
which in this case was Peter, charges a 2% fee on the total assets under management every year
along with a 20% fee on all profits generated from the fund. Peter is often known to charge
no annual management fee a make his entire compensation performance-based. For example,
one of his later funds, Clarium Capital, charged 0 and 25. When you’re only dealing with a million
dollars, this doesn’t translate to very much money, but if you hit some winners and grow
into the tens of millions and hundreds of millions or especially billions, you
start making bank. And let’s just say, Peter was about to have the winning streak of a lifetime.
WINNING STREAK OF A LIFETIME: Peter naturally started off by investing in his
friend’s ideas. His first investment was $100,000 in his friend Luke Nosek who was building out a
web-based calendar similar to Google Calendar. Unfortunately, this company went bust and Peter
would lose the $100 grand, but the investment into Luke was by no means a waste. You see,
after the calendar project flopped, Luke would team up with one of his tech friends, Max Levchin,
and together, they would create a new company called Fieldlink using capital from Peter. The
company was trying to become a cybersecurity company for handheld devices but this didn’t
go anywhere either. So, Luke and Max would pivot once again into the digital wallet industry with
a company called Confinity. You might not be familiar with Confinity but you’re definitely
familiar with what it became. Confinity would go on to merge with another fintech company
called x.com founded by Elon Musk and a few others and together, they would create PayPal.
Now technically, after the founders had a falling out and Elon Musk got fired from his role as CEO,
Peter would take over as CEO of PayPal in October of 2000, but he was by no means your typical CEO.
Peter’s job as CEO was not to build out the company or invest in the team or scale profits,
but rather find PayPal an exit, and that’s exactly what he did. He would take the company public in
early 2002, and later that same year, he would get eBay to buy the company for $1.5 billion. Due to
all the failures, pivots, mergers, and dilution, Peter was watered down to 3.7% by the time the
deal closed, but this itself resulted in $55 million for Peter. At this point, most would count
their lucky stars and retire, but Peter was just getting started. Now that he actually had capital
of his own and status as the don of PayPal, Peter would simply double down on investments. In 2002,
he founded a hedge fund called Clarium Capital and in 2003, he founded Palantir which you’ve probably
heard of if you were part of the 2021 investing boom. By far his biggest play though didn’t come
till 2004. This is when Peter cemented himself as a legendary VC investor by becoming the first
outside investor of Facebook. In August of 2004, he gave Mark $500,000 in exchange for 10.2% of
Facebook. Let me just remind you that Facebook is now worth $1.3 trillion. Now, of course,
Peter’s 10% stake got heavily diluted with newer investors and stock compensation plans. Also,
Peter didn’t just hold his entire stake forever. He did cash out over time, but despite all that,
Peter’s $500,000 investment would turn into billions. Peter would use all these returns
to invest in a slew of Silicon Valley startups including Asana, Lyft, Yelp, Airbnb, Zynga,
Twilio, Spotify, SpaceX, and Stripe just to name a few. Peter has over a hundred such investments,
so it’s no wonder he made a killing. But more than all of his startup investments,
the investment that sticks out to me the most is his bet on cryptocurrencies. If you didn’t already
know this, I think this will blow you away. Peter Thiel is arguably the reason that Ethereum,
the $400 billion cryptocurrency exists. Roughly 10 years ago, Peter gave Vitalik Buterin $100,000
to drop out of college and go full-time on developing Ethereum. And this was by no means
Peter’s first dabble in crypto. In fact, Peter has been predicting that some sort of digital currency
will take over the world since 1999. And I think that right there tells you everything you need to
know about how Peter made $10 billion. Peter never worked to the bone coding or doing physics or any
of that traditional stuff. But he didn’t need to, because that’s not where his talents really laid
even though he was good at stem. Peter was and is a philosopher a true visionary just like his
degree suggests. He foresaw the internet boom and the social media boom and the cryptocurrency boom.
He’s heavily invested in the AI space as well. Now, of course, Peter had tremendous resources
to be able to turn his visionary thinking into profit, but that doesn’t change the fact that
Peter is one of the most unique billionaires out there. He worked smarter, not harder and
that’s how Peter Thiel made $10 billion without ever really working. If you're interested in
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